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J.P. Morgan Chase has turned its back on the stock market: For the first time in seven years, the investment bank is urging investors to sell stocks on any bounce.

“Our view is that the risk-reward for equities has worsened materially. In contrast to the past seven years, when we advocated using the dips as buying opportunities, we believe the regime has transitioned to one of selling any rally,” Mislav Matejka, an equity strategist at J.P. Morgan, said in a report.

“We fear that the incoming fourth-quarter reporting season won’t be able to provide much reassurance for stocks,” he said.

Expectations for earnings are so bearish that the hurdle rate—the minimum rate of return on an investment that makes it worth the risk—for fourth-quarter results is now minus 4%, compared with plus 5% several months earlier.

“If this were to materialize, it would be the weakest quarter for EPS delivery so far in the upcycle,” said Matejka.

Further adding to the grim outlook is the slowdown in the manufacturing sector, which pushed J.P. Morgan’s profit-margin proxy — the gap between pricing power and the wage costs — into negative territory in the fourth quarter for the first time since 2008.

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RBS cries 'sell everything' as deflationary crisis nears

RBS has advised clients to brace for a “cataclysmic year” and a global deflationary crisis, warning that major stock markets could fall by a fifth and oil may plummet to $16 a barrel.

The bank’s credit team said markets are flashing stress alerts akin to the turbulent months before the Lehman crisis in 2008. “Sell everything except high quality bonds. This is about return of capital, not return on capital. In a crowded hall, exit doors are small,” it said in a client note.

Andrew Roberts, the bank’s credit chief, said that global trade and loans are contracting, a nasty cocktail for corporate balance sheets and equity earnings. This is particularly ominous given that global debt ratios have reached record highs.

“China has set off a major correction and it is going to snowball. Equities and credit have become very dangerous, and we have hardly even begun to retrace the 'Goldlocks love-in' of the last two years,” he said.

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Deflation a serious threat to investors

We have no historic precedent to draw upon and asset pricing is moving in uncharted waters.'Photo: Dorothy Woodgate

Deflation is the "most likely" scenario for most of the developed world, according to a gloomy note from Sydney-based Clime Asset Management, while Fidelity and HSBC have also echoed their concern about the spectre of falling prices.

Clime said the outlook for the world's developed economies was one of lower growth and low inflation.

"We would therefore speculate that the most likely economic scenario for most of the developed world is deflation. A re-run of Japan's decades of low growth but on a grander worldwide scale."

Deflation is characterised by falling prices, as opposed to inflation, which is defined as rising prices. Economists consider deflation a threat because it increases the real value of debt and may aggravate recessions through a deflationary spiral.

Clime stated that the "inflexion point into this low growth era has been passed" and markets were realising that investment returns were going to be single-digit and consistent with low economic growth. The World Bank last weekdowngraded growth forecasts.

Clime said that "this economic period and the economic settings are unique in world economic history...we have no historic precedent to draw upon and asset pricing is moving in uncharted waters."

Any cash you can grab and stash do it, not like it's earning you interest in the bank. Or is even safe from being grabbed.

Would it not be better to buy gold or silver?or use ur money now to get things you need NOT WANT!stop paying ur debt to banksters and start making sure you have food,water,and supplies for your family when hell breaks loose?Yea its messed up to borrow money and not pay it back but more and more banks are NOT giving loans to small buisnesses that serve the community!!Buy local and get ready to weather the storm.QUESTIONS AND MY OPINION IN THERE!!

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